Do car dealers charge you an up-front fee before you step onto the lot? Does a real estate agent to charge you a fee before he or she shows you a home? Obviously not. But for years, debt settlement companies have gotten away with charging high fees before providing consumers with any debt relief at all. That’s about to change, however, as the Illinois General Assembly moved to ensure that debt settlement companies get paid for the work they do, not for the work they promise to do in the future, by passing the Debt Settlement Consumer Protection Act (HB4781).

The Better Business Bureau reports that the number of complaints against debt settlement companies that have failed to deliver any meaningful benefit to consumers has ballooned.

Take Darren Robinson, and his girlfriend Julie Fitzpatrick, who accrued almost $10,000 in credit card debt paying for living expenses and medical bills after Robinson lost his job. After enrolling with a company found online that promised to make them debt free, the couple told the Chicago Tribune that they were charged $1,500 in up-front fees. After a few months, only $2,000 of the debt was settled, and their debts ballooned to $12,000 as collection calls and fees increased.

To make matters worse, once a consumer stops paying their creditors, they are likely to face debt collection harassment or even lawsuits. Creditors add more and more fees and raise interest rates, causing the debt to grow. Given the precarious financial situation of the consumers and the high rates of the debt settlement agencies, it often takes many years for the consumers to save up enough money to settle their debts, if they are able to complete the program at all. Since consumers can negotiate with creditors themselves, it is questionable how much benefit debt settlement agencies provide for their high price tag.

Sponsored by Rep. Marlow Colvin (D-Chicago) and Sen. Jacqueline Collins (D-Chicago), HB4781 will protect consumers by prohibiting all up-front and monthly fees except for a one-time $50 application fee and by capping fees at 15 percent of the savings achieved from settling a debt. The legislation also prohibits debt settlement companies from advising consumers to stop payments to creditors and allows cancellation of a contract at any time, with prompt refund of fees. To ensure that consumers have some means to resolve unethical conduct and to ensure compliance with these new protections, the legislation requires debt settlement companies to be licensed by the Illinois Department of Financial and Professional Regulation and bonded.